Brush News

Comcast-Time Warner Cable merger will have huge impact on Colorado

By Andy Vuong The Denver Post

Posted:
02/14/2014 12:01:00 AM MST

Updated:
02/14/2014 08:37:19 AM MST

Brian Hunt, director of engineering, South Florida, stands among the cables and routers on Tuesday at a Comcast distribution center in Miramar, Fla., where video, high-speed data and voice are piped out to customers. (Joe Raedle, Getty Images)

How will the proposed merger between Comcast and Time Warner Cable affect your monthly cable-TV and high-speed Internet bill? That's perhaps the top question hovering over the $45 billion deal announced Thursday, but its impact on Colorado will extend far beyond pay-TV and broadband prices.

Both companies have substantial workforces in the state, with Comcast employing more than 6,500 in Colorado, the cable giant's biggest footprint outside of its headquarters in Philadelphia.

Further, the long-term strategic plans for two of the state's most valuable companies, Dish Network and Liberty Media, could hinge on whether regulators and antitrust officials approve the marriage of the nation's largest cable-service providers.

Shortly after news of the deal leaked Wednesday night, consumer advocates and public-interest groups warned that the merger would lead to higher prices and hurt innovation.

But the consumer-protection analysis is not as clear-cut as with other proposed megamergers, such as AT&T's failed bid to acquire T-Mobile, because Comcast and Time Warner Cable don't compete in the same markets.

Comcast serves 22 million cable-TV subscribers, while Time Warner Cable has 12.2 million, according to the National Cable & Telecommunications Association.

Comcast is Colorado's largest cable company, with 850,000 customers. In the state, Time Warner Cable offers service only in Gunnison and Telluride, non-Comcast markets.

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Still, consumer advocates say the deal could give Comcast additional muscle to drive competitors out while customer service is negatively affected as the companies integrate.

"Sometimes, to keep prices low, it's not just the actual competition that is important but also potential competition," said Sanjai Bhagat, a provost professor of finance at the University of Colorado at Boulder. "I don't know of any industry whereby having fewer players, the customers have been made better off."

Comcast offered nearly $159 a share for Time Warner Cable, a 17 percent premium over where Time Warner Cable shares closed Wednesday.

Comcast and Time Warner Cable say the deal has many pro-consumer benefits, including the "accelerated deployment of existing and new innovative products and services."

Ian Olgeirson, a senior analyst with SNL Kagan, said he doesn't "see too many direct consumer impacts" from the merger.

"If you are a Time Warner Cable subscriber, then there should be gradual changes to the service suite," Olgeirson said. "I don't think that rates will increase or decrease as a direct result. The competitive dynamic in their markets will remain the same."

Comcast and Time Warner Cable operate multiple sizable offices along the Front Range. The latter employs hundreds of engineers and customer-care workers in metro Denver and Colorado Springs, home to one of the company's largest call centers.

The merger will undoubtedly lead to job cuts, and Time Warner Cable CEO Rob Marcus sought to ease concerns by telling employees in an e-mail Thursday that "the vast majority of you will not only retain your jobs, but many will also discover new growth opportunities as you progress in your career with the new company."

Colorado billionaire and cable pioneer John Malone has had his eye on Time Warner Cable for some time.

Malone is chairman of Douglas County-based Liberty Media, which is the largest shareholder of Charter Communications, the nation's fourth-largest cable company.

Charter proposed to acquire Time Warner Cable in January, a $132.50-a-share offer that was quickly rejected.

Wunderlich Securities analyst Matthew Harrigan said it's highly unlikely Charter will up its offer and enter a bidding war with Comcast. Instead, Charter may snatch up some of the cable systems that Comcast may be asked to divest to win regulatory approval.

"I still think Charter and Liberty can be winners if Comcast disposes of some of the systems," Harrigan said. "I think the industry has to consolidate some more even beyond this transaction."

Macquarie Securities analyst Amy Yong said Charter and Malone could eye privately held companies such as Cox Communications, Suddenlink and Bright House.

If the Comcast-Time Warner Cable deal is approved, satellite-TV competitors Dish Network and DirecTV may revive previous efforts to merge, which would create a company with 34 million subscribers nationwide.

"This definitely helps support a DirecTV-Dish merger because they can argue pay-TV competition is on the rise and Comcast-Time Warner Cable have close to a nationwide footprint," Yong said.

Harrigan disagreed, pointing to the fact that, unlike Comcast and Time Warner Cable, Dish and DirecTV are direct competitors in every market nationally.